JPM G10 FX Daily

EUR: EM Panic, G10 Calm, Fed Hawkishness Peaking

There is full panic in EM, but G10 is as chilled as can be.

That makes sense. Post-payrolls, people had become quite comfortable with the summer-of-carry view.

I find the Middle East situation hard to handicap here.

You cannot really trust anything either side says at this point.

Whether this becomes full escalation, I do not know.

Personally, I never thought we were going to get a full peace agreement. An elongated, uneasy steady state always seemed more likely.

Despite the skirmishes, that still feels like the most likely outcome.

But given noise levels are higher and market levels are more complacent, the wobble is understandable.

Fed: Peak Hawkishness May Be Behind Us

On Fed policy, I am more confident that we have seen peak hawkishness for a while.

By extension, upward pressure on the USD from the Fed angle should also be waning.

The sequence matters:

• Warsh at Sintra

• Payrolls

• FOMC minutes last night

Yes, “a few” participants saw the case for a hike in June.

But the broader sense is that the committee is more split than the dots suggested.

CPI next week is the final piece of the puzzle before a two-week gap until the next FOMC meeting.

If CPI is semi-inline, that should be enough for the market to relax a little more.

Portfolio: Painful, But Still Digging In

Clearly, yesterday was painful overall.

I am trying to dig in on:

• Short USD/ZAR

• Short EUR/HUF

I added a tiny bit more.

Positioning may argue for the squeeze, but the medium-term story still looks attractive, especially with EUR/HUF above 360, if you have room.

On the G10 side, conviction is limited.

As above, I feel the upward USD impulse is waning in the short term.

But I am not sure I want to be short USD across the board just yet.

So I still hold small USD/CHF longs as insurance.

That said, USD/CHF price action above 0.8100 is once again not amazing.

EUR/USD: Range, Not Breakdown

EUR price action was interesting.

The currency did not really react during the height of the panic, despite the drift back toward 1.1400.

There was never any real downside momentum.

We saw a small amount of real-money selling, but requests were minimal.

People are already bearish and short.

That is why I am not pushing a lower EUR view here.

I still see potential positives — or at least less pessimistic outcomes — for Europe, as outlined previously.

But those are more of a cushion than a reason to express an outright bullish EUR view.

So this likely translates into more of a range trade at current levels.

Key levels:

• Downside zone to clear: 1.1400–1.1340

• If broken, corporate and real-money nervousness should increase

• Short-term topside: 1.1500/30

• Above there, momentum accounts may give up

• But medium-term supply should emerge just above, with the 50d, 100d and 200d moving averages all falling

Trade bias: Neutral/range EUR/USD.
Downside zone: 1.1400–1.1340.
Topside trigger: 1.1500/30.
Risk: Hot CPI or real Middle East escalation breaks the range.

GBP: The Burnham Relief Trade Has Gone Far Enough

Sterling continues to trade very well indeed.

Having leaned that way for the past few weeks, I have still been surprised by the scale of the rally in the “he is not so bad” trade.

That trade effectively started when EUR/GBP was around 0.8725.

Add in:

• A more dovish Bailey

• An EASI that continues to melt dramatically

And I am left scratching my head.

Even on a day with one of the more acute Middle East flare-ups, and with gilts leading lower, GBP remained stable and bid.

Flows: Sterling Demand Has Been Strong

Franchise flows have been very positive:

• SHFs are now on a 10-day GBP buying streak

• RM have bought decent amounts this week, averaging over 1.25z per day

• GBP has been the top-bought currency by DHF since the by-election

I am starting to think we have now come far enough.

I have started to nibble at EUR/GBP longs down here and offset the carry angle elsewhere.

HUF had a nice correction yesterday, so that seems like an ideal candidate.

Politics: Leadership Process Begins, But Questions Remain

A bit of housekeeping.

Even though it is effectively a done deal, Labour leadership nominations open today and the process will last a week.

The only other name I had heard was Cairns, who has now thrown his support behind Andy Burnham.

There has been talk of economic blueprints crystallising in the Burnham camp.

But many questions still need answering.

The recent OBR report on fiscal trajectory concerns highlights this.

Key levels:

• EUR/GBP: 0.8470/0.8600

• Cable has traded through the 1.3397/05 cluster of moving averages:

  • 50d

  • 100d

  • 200d

• Next cable resistance: 1.3470/00

Trade bias: Starting to nibble EUR/GBP longs.
EUR/GBP range: 0.8470/0.8600.
Cable resistance: 1.3470/00.
Flow: Very strong GBP demand.
Risk: GBP momentum and carry continue to squeeze EUR/GBP lower.

JPY: No Help From GPIF, Risk of Slow Grind to 165

There is not a lot to say on JPY here.

GPIF finally put me out of my misery on Friday — there is always next year.

We should expect little jawboning going forward.

Clearly, oil and rates put more pressure on JPY yesterday.

USD/JPY almost printed a cycle high.

But the continued glacial nature of net progress through the 40-year highs has been relatively encouraging to authorities.

I had thought signalling risk might cause an acceleration that would force them to act.

In this setting, I worry we could simply keep grinding toward 165.

Am I long JPY?

Of course not.

It remains an uncomfortable experience to be a JPY trader at present.

Flow-wise, offshore real money has been a good seller of JPY this week.

Fed minutes had something for everyone last night, but I would say they were not as hawkish as feared.

US initial jobless claims are due later.

Trade bias: No JPY long here.
USD/JPY risk: Slow grind toward 165.
MoF: Less jawboning expected unless move accelerates.
Flow: Offshore RM selling JPY.
Risk: Sudden acceleration forces intervention.

CHF: Sell CHF Rallies, But USD/CHF Above 0.8100 Fades Again

Risk was on the back foot yesterday after Trump suggested the ceasefire was over.

That gave the greenback a heavily bid tone in London.

USD/CHF traded above 0.8100, but the move was short-lived.

The pair is now back around 0.8060.

Our CHF view is unchanged:

• Sell CHF rallies versus USD

• Use CHF as a hedge against higher-beta longs elsewhere

Trade bias: Bearish CHF; small USD/CHF longs as insurance.
USD/CHF: Failed again above 0.8100.
Portfolio role: Funder/hedge against high-beta longs.
Risk: Risk-off CHF demand deepens the pullback.

AUD / NZD: Bought AUD/NZD Again, But Price Action Is Worrying

In yesterday’s commentary, I said the RBNZ was data-dependent and did not move the needle on my view.

The plan was to buy AUD/NZD toward the 100dma around 1.2105.

When I left last night with the cross around 1.2155, I wondered if I would get the chance.

Step forward Governor Breman.

In an overnight radio interview, she said:

• “Signs that economic recovery is stronger than the RBNZ expected”

• “Two more hikes before year-end were not not realistic”

I am not sure about her terminology, but the message was clearly more hawkish than the previous evening.

With Business PMI jumping from an upward-revised 51.3 to 59.7, NZD has been the overnight outperformer.

AUD/NZD broke short-term trendline support at 1.2136 and is now approaching a crucial support zone:

• 100dma: 1.2105

• Trendline support from July 2025: 1.2060

I have tentatively bought the cross again.

Full disclosure: price action is concerning.

A move below 1.2050 would force reassessment.

The FOMC minutes were a little more dovish than expected, although USD barely moved.

That should help the long AUD basket view.

But with Warsh leading us into a data-dependent world, next week’s US inflation is more important.

Trade bias: Tentatively long AUD/NZD.
Support zone: 1.2105–1.2060.
Reassessment: Below 1.2050.
NZD driver: Hawkish Breman + strong PMI.
Risk: NZD momentum breaks support cleanly.

CAD: Oil Supports, But Canada Still Weak Medium Term

Focus is unfortunately back on the Middle East.

Trump suggested the ceasefire might be over and that the US would attack Iran again.

This left risk on the back foot and pushed oil higher.

USD/CAD fell toward 1.4160.

That said, I have reduced CAD exposure somewhat recently.

I still think Canada’s weak growth profile should keep CAD on the back foot over the medium term.

Flows yesterday showed better USD/CAD supply from HF accounts.

Trade bias: Reduced CAD exposure, still medium-term bearish CAD.
USD/CAD: Down toward 1.4160 on higher oil.
Driver: Middle East escalation supports oil/CAD.
Risk: Sustained oil rally continues to support CAD.

SEK / NOK: Retain Reduced NOK Longs Into Norway CPI

Brent rose above $80 yesterday and remained elevated after further attacks from both sides overnight.

Then a Trump post this morning — “Iran called a while ago, they want to make a deal” — saw oil come off the overnight highs.

I assume “a while” means a few hours and is not a reference to several weeks ago.

Although with Trump, you can never be sure.

I also wonder whether Iran called at all.

So I will roll my eyes once again.

The overriding view seems to be that this will be short-lived and that traffic through the Strait, which has currently stalled, will resume fairly quickly.

I tend to agree.

I do not believe either side wants full escalation.

But the increase in tensions reinforces my point: with inventories supposedly at critical levels and the ceasefire fragile, demand to replenish the shortfall should put a floor under oil, at least in the short term.

That should mean NOK outperforms SEK, given exporter/importer dynamics.

However, it was interesting that RM sold NOK/SEK yesterday after eight consecutive days of NOK demand.

On the other side, SHFs finally halted their NOK selling streak.

If that continues, it will support the long NOK view.

Tomorrow is important for the short-term NOK setup, with June inflation due.

That matters for:

• Norges Bank

• FI markets, currently pricing 17bp for the August meeting

• My own positioning

I retain reduced NOK longs into the print.

Trade bias: Reduced NOK longs.
Catalyst: Norway CPI tomorrow.
FI pricing: 17bp for August Norges meeting.
Oil: Floor likely in short term, but full escalation not base case.
Risk: Soft Norway CPI or oil reversal weighs on NOK.